How to Get Income Tax Benefits from NPS?

National Pension System (NPS) is a Government of India sponsored retirement scheme under which an investor is given the option to invest in preferred categories like the stock market, government securities.

How to Get Income Tax Benefits from NPS
Get Income Tax Benefits

According to the website of National Securities Depository Limited (NSDL), the investor can know the current price of an investment in his NPS account day by day.

NSDL itself is the Central Recordkeeping Agency for NPS (CRA). Each employee is identified by a unique number, and each employee has a permanent retirement account number or PRAN.

In her first budget, Finance Minister Nirmala Sitharaman had made some changes in the income tax rules on investment under the National Pension System (NPS).

Sitharaman had raised the income tax exemption limit on withdrawals from National Pension Scheme (NPS) accounts and announced some additional income tax benefits for employees contributing to NPS accounts.

The key information related to the National Pension System (NPS) is as follows:

Income Tax Benefits from NPS
Income Tax Benefits from NPS

How to open NPS account…?

Nps account can be opened in two ways by any Indian citizen between the age of 18 to 65 years – online and offline. According to NSDL, any subscriber can apply to the NPS account by visiting point of presence (PoP), or apply online on the e-NPS website

NPS Withdrawal Rules…

According to NSDL, partial withdrawals are allowed under certain circumstances from a mandatory Tier 1 account under NPS.

For withdrawals before the age of 60, the subscriber will have to leave at least 80 per cent of the deposit pension account to give him a monthly pension. According to NSDL, the remaining 20 per cent is paid to the subscriber in lump sum.

If the total deposit in the NPS account is less than Rs 2 lakh, the subscriber can opt for 100 percent withdrawal if he is 60 years of age. In other cases, at least 40 per cent of the deposits will have to be left in the pension account. According to NSDL, the remaining 60 per cent is paid to the subscriber in lump sum.

In case the subscriber dies, his nominee has the option of 100 per cent lump sum withdrawal. According to NSDL, the nominee may also opt to continue the NPS account, for which it will have to meet the necessary KYC conditions and become a subscriber of NPS.

How to get income tax benefits available under NPS scheme

An existing customer can avail of it at any time – the service provider (PoP-SP) or alternatively the e-NPS website – to make additional contributions to the Tier I account on

Any member associated with this scheme can furnish transaction details as investment proof. All NPS customers can download their deposit receipt to tier I account in a financial year by logging in to their NPS account.

What are the income tax benefits available under nps scheme

In last year’s budget, the government had increased the income tax exemption on 40 per cent withdrawals from the National Pension System (NPS) to 60 per cent withdrawals.

The government had proposed to separate the NPS trust from the Pension Fund Regulatory and Development Authority (PFRDA). PFRDA earlier implemented and controlled the National Pension System (NPS) through nps trusts. The trust was set up by PFRDA to take care of assets and money under NPS.

Finance Minister Nirmala Sitharaman had proposed the government to increase the contribution limit to its employees’ accounts from 10 to 14 per cent.

As per the existing provisions, any NPS customer can claim tax deduction up to 10 per cent of gross income under Section 80 CCD(1) of the Income Tax Act in the total limit of Rs. 1.5 lakhs under Section 80 CCE of the Act.

As per NSDL’s website –, special exemption is available to customers under Section 80CCD (1B) of the Income Tax Act on additional investment of up to Rs 50,000 in NPS.

The amount invested in the purchase of a pension plan is also fully exempted from tax. However, the pension income that the customer receives in later years is subject to income tax.

Also Read: How TO increase investment strategy

Leave a Reply

Your email address will not be published. Required fields are marked *